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Progenics Pharmaceuticals (PGNX) Q2 2019 Earnings Call Transcript

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Progenics Pharmaceuticals (NASDAQ: PGNX)
Q2 2019 Earnings Call
Aug 09, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the Progenics Pharmaceuticals second-quarter 2019 results conference call. [Operator instructions] I would now like to introduce your host for today's conference call, Ms. Melissa Downs, head of investor relations. You may begin.

Melissa Downs -- Head of Investor Relations

Thank you, operator. On behalf of Progenics' management team, thank you for joining our conference call to review our second-quarter 2019 financial results and provide a business update. Joining the call today are Mark Baker, chief executive officer; Dr. Asha Das, chief medical officer; Bryce Tenbarge, senior vice president, commercial; and Pat Fabbio, executive vice president and chief financial officer.

Before we begin, I'll remind you that remarks made on this call that are not historical in nature may be forward-looking statements and are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to, those involving regulatory actions, clinical development and other matters related to our prostate cancer pipeline: Azedra, Relistor and our other product candidates, our business and commercialization strategies and expectations of future growth, revenues and assessments of our competitive position. Please see our most recent forms 10-Q, 10-K and other filings with the U.S.


Securities and Exchange Commission for additional information on the risks that could cause our actual results to differ. As a reminder, statements we make today are as of August 9 only. I'll now turn the call over to Chief Executive Officer Mark Baker. Mark?

Mark Baker -- Chief Executive Officer

Thank you, Melissa, and good morning to everybody joining us today. We reported meaningful progress across our entire portfolio of targeted radiopharmaceuticals designed to find, fight and follow cancer, setting the stage for future growth. A key focus for us this past year has been the launch of Azedra. Bryce will provide a commercial update momentarily, but I want to begin today by highlighting the recent new technology add-on payment or NTAP ruling from the Centers for Medicare & Medicaid Services, or CMS.

This new action by CMS cements support for the significance of Azedra as a new clinically relevant product offering, substantial benefit for pheo and para patients. The NTAP provides an important increase in reimbursement to hospitals when treating inpatient Medicare patients with Azedra. We are encouraged by the progress we are making and believe that we are laying the groundwork to support the long-term commercial success of Azedra. In parallel to our Azedra launch, we also achieved key milestones for our portfolio of PSMA-targeted pipeline of diagnostics, therapeutics and technologies for prostate cancer.

Most recently, we completed enrollment well ahead of schedule for our Phase 3 Condor study of our PyL imaging agent for prostate cancer. We also dosed our first patient in our Phase 2 trial of 1095. Asha will discuss our clinical programs and regulatory updates in further detail a little later on. I'll now turn the call over to Bryce for the Azedra commercial update.

Bryce?

Bryce Tenbarge -- Senior Vice President, Commercial

Thanks, Mark. As Mark mentioned, we recorded our first sales of Azedra in the second quarter, and we are building on that milestone as we advance the commercialization of Azedra. We have 32 treatment requests. Our commercial focus is on converting these requests to treated patients.

Last week, CMS approved a new technology add-on payment, or NTAP, for Azedra when administered to the hospital inpatient setting for Medicare beneficiaries. The NTAP determination by CMS validates the significance of Azedra as a new clinically relevant product for pheo and para patients. It plays a vital role in providing supplemental reimbursements for the inpatient administration of Azedra. Fewer than 30% of the products that have ever been closed have been granted the special add-on payment for the inpatient hospital setting.

The NTAP will cover the lessor a 65% of the average cost of Azedra or 65% of the cost in excess of the Medicare Severity Diagnosis Related Groups or MS-DRG payment for a case. As a result, the maximum new technology add-on payment for a case involving a therapeutic dose of Azedra is $98,150. We currently have 13 centers throughout the country that are activated for patient treatment. With our patient support services programs available to support out-of-pocket needs, including travel to these centers, we can accommodate the patients who are in need of therapy and are continuing to work with centers across the country to broaden the availability of Azedra. As we've worked through the onboarding process with centers of excellence, we're concentrating on the broader referral community to familiarize endocrinologists and other physicians who may see pheo and para patients with the potential benefit of Azedra.

We are doing this through non-personnel efforts, such as traditional print media, as well as social media and through the direct efforts of our sales force. Our market access team is working to ensure proper support is available to our activated centers that need coding and billing systems. Our pass-through C-code from CMS was approved earlier this year, and we anticipate that our permanent A-codes will be awarded in November and implemented in January of 2020. We are also pleased that commercial payers are supporting reimbursement for Azedra, and all plans that have written coverage policies are covering the label.

In July, we announced the hiring of Huw Jones in a newly created role of vice president, commercial. Huw has over 30 years of global experience putting commercial strategy and operations in the pharmaceutical industry, with deep experience in radiopharmaceuticals and oncology. He joins our team after two decades at Novartis and its subsidiaries, where he served in multiple commercial leadership positions, most recently as interim general manager and vice president of marketing and sales for the company's subsidiary, Advanced Accelerator Applications. We're very excited about to have Huw join our team at this important time for Progenics as we are executing on our ongoing commercialization of Azedra, starting to prepare for the launch of PyL in the U.S.

and advancing 1095. I will now turn the call over to Asha for an update on clinical developments. Asha?

Asha Das -- Chief Medical Officer

Thank you, Bryce. Our growing medical sales team is actively educating the physician and key opinion leader community to continue building awareness of Azedra. For example, the recent ASCO presentation was particularly well attended with the pheo and para data demonstrating a five-year long-term survival rate of 38.3% and a median survival time of 41.1 months, impressive outcomes in this patient population with unresectable, locally advanced or metastatic pheo or para who requires systemic anticancer therapy. We're moving forward with our life cycle management plans and have reached alignment with the FDA to transact a basket study that will evaluate Azedra in patients with neuroendocrine tumors that are MIBG-avid, including gastroenteropancreatic neuroendocrine tumors, or GEP-NETS, and other NETS. We plan to use the dosing regimen that potentially enables outpatient administration.

Key opinion leaders have been supportive of this plan, especially due to the lack of treatments available for these rare types of tumor. The basket study is expected to initiate by the end of the year and will enroll approximately 150 patients at sites in the U.S. and Canada. Now turning to PyL.

We are very pleased with the recently completed enrollment of our Phase 3 Condor study of PyL for the detection of prostate cancer, well ahead of our previous fourth quarter guidance. Increased interest in the program translated into rapid enrollment of 208 patients with biochemical recurrence of prostate cancer. Top line data from this study is expected by the end of the year, and if positive, will serve as the basis for an NDA for the program, which we expect to file by July 2020. Recent presentations from multiple investigator-sponsored studies have increased our confidence in the potential utility of this novel imaging agent. Collectively, the emerging data profile highlights the diagnostic potential of PyL to detect locally advanced prostate cancer, biochemically recurrent prostate cancer, metastatic disease and importantly alter physician treatment decision-making.

These studies have demonstrated that PyL provided early detection of disease, including in men with very low PSA levels. Additional data show that PyL identified sites of recurrent disease and changed clinical management in patients with negative conventional imaging. Overall, the data suggests that PyL could be a one-stop shop for the evaluation of patients with biochemically recurrent prostate cancer. These independent studies, taken together with our OSPREY data, are encouraging.

We have great confidence in the program as we head into our Condor readout at year-end. Turning to our ex-U.S. development efforts. Our European PyL partner, Curium, is in dialogue with the European Medicines Agency to discuss the regulatory path forward for PyL in Europe, and we look forward to providing updates when available.

Let me close with 1095 radiotherapy, which has a mechanism of action that may overcome resistance developed to the antiandrogen. In June, we dosed the first patient in our multicenter, randomized, open-label, controlled Phase 2 clinical study, evaluating the efficacy and safety of 1095 in combination with enzalutamide compared to enzalutamide alone in patients with metastatic castration-resistant prostate cancer who are PSMA-avid, chemotherapy-naïve and progressed on abiraterone. PSMA-avidity is determined utilizing PyL. We plan to enroll approximately 120 patients in this study in a two to one randomization.

The primary endpoint is PSA response rate. Secondary endpoints will evaluate radiographic response, progression-free survival and overall survival. Patients will be followed for one year after their first treatment for all efficacy endpoints. Survival and safety data will be collected for an additional year.

Based on the early data from this open-label study and dialogue with FDA, we plan to evaluate initiating a pivotal trial of 1095 in 2020. We are proud of our recent clinical advancements and look forward to moving our pipeline into late-stage development during the second half of the year. Let me now turn the call over to Pat for a review of our financials. Pat?

Pat Fabbio -- Executive Vice President and Chief Financial Officer

Thanks, Asha. You can review details of our financials in the press release we issued this morning and in the 10-Q that we will file later today. Second-quarter revenue totaled $10 million, up from $3.9 million in the second quarter of 2018, primarily due to the achievement of a $2 million milestone under the Bayer agreement for the dosing of the first patient in the Phase 1 trial of PSMA TTC and a $4 million upfront payment from FUJIFILM under the aBSI transfer agreement. Second-quarter Relistor worldwide sales were $24 million as reported by our partner, Bausch Health.

Azedra sales were $270,000 and reflect therapeutic dosing that began in June. Research and development expenses increased by $3.7 million compared to the corresponding prior-year period, resulting primarily from higher clinical and contract manufacturing costs for clinical trial materials for 1095 and PyL and higher costs associated with the transition for the Azedra manufacturing site and additional production capacity for iodine-based products. Second-quarter selling, general and administrative expenses increased by $7 million compared to the corresponding prior-year period, primarily attributable to an increase in legal and advisory fees associated with the contested election at our 2019 Annual Meeting of Shareholders of $5.5 million and PSMA-617 litigation costs of $1 million. We also recorded noncash adjustments of $900,000 in the second-quarter 2019 related to changes in the fair value estimate of the contingent consideration liability. For the three months ended June 30, 2019, we recognized interest expense of $1.1 million related to the Relistor royalty-backed loan.Our net loss for the second quarter was $19.7 million or $0.23 per diluted share compared to a net loss of $15.2 million or $0.20 per diluted share in the corresponding 2018 period. In terms of our cash position, we ended the quarter with cash and cash equivalents of $84.8 million, reflecting a decrease of $24.8 million for the quarter, primarily reflecting cash use for operating expenses.

And now I'll turn the call back over to Mark to conclude with a review of our corporate developments.

Mark Baker -- Chief Executive Officer

Thanks, Pat. In parallel with in our clinical progress, we have continued to form and advance important partnerships, which we believe will help maximize the value of our assets. We continue to leverage partnerships with global pharmaceutical companies to enable the further extension of our PSMA-targeted pipeline and AI technologies worldwide. This includes our license agreement with ROTOP for the rights to develop and commercialize 1404, our PSMA-targeted small molecule SPECT/CT imaging agent in Europe.

Based in Germany, ROTOP is a leading radiopharmaceutical company focused on diagnostics and therapeutics, as well as a strong expertise in the production of technetium kits, such as 1404. Per the agreement, Progenics is eligible for double-digit, tiered royalties based on future sales of 1404 in Europe. ROTOP plans to refine their clinical development plans based on guidance from leading KOLs before meeting with European regulators and beginning a clinical trial next year. Separately, we furthered our relationship with FUJIFILM with the transfer agreement for the rights for our aBSI product in Japan for use under the name, BONENAVI.

BONENAVI has been licensed to Fujifilm for use in Japan since 2011. Our aBSI has the potential to improve physician treatment decisions for prostate cancer by providing a fast and reliable alternative to manual interpretation of bone scan images. These validating AI collaborations further highlight the potential of these technologies to improve the patient experience and streamline physician treatment decisions. In June, we presented AI data at SNMMI, in which we evaluated the diagnostic performance of PSMA AI using SPECT/CT scans from the company's Phase 3 study of 1404.

Independent readers using our PSMA AI demonstrated a statistically significant improvement in accuracy, speed and reproducibility over readers without PSMA AI, a conclusion that again shows the clinical potential of these technologies. We look forward to presenting further AI data throughout the year as we continue to advance the development of these diverse cutting-edge technologies. In support of our PSMA AI development efforts, we recently received 510(k) clearance from the FDA for the cloud-based version of aBSI. This is an important step in the development of PSMA AI for use with PyL.

With this 510(k) in place, further product developments based on this core technology will benefit from a more rapid, streamlined approval process. Finally, before we open the call to questions, I want to provide an update on the PSMA-617 litigation. As a reminder, we are asserting ownership rights to intellectual property for PSMA-617. Earlier this week, the District Court of Mannheim in Germany held the first oral hearing in the case.

The court considered procedural matters and granted the parties the right to make further submissions. We recognize that the launch of Azedra has been challenging. That said, we believe that we are seeing signs of progress, evidenced by our first recorded sales, continued increase in treatment requests, strong interest from KOLs and our recent NTAP ruling from CMS. Our passionate team is motivated by our mission to develop diagnostics, therapeutics and technologies to find, fight and follow cancer.

As we continue to advance our pipeline into late-stage development and are nearing regulatory filings, we remain focused on delivering value for shareholders. I want to reiterate that we value the views of our shareholders and are open to any opportunities that may advance our common goal of enhancing shareholder value. We believe that Progenics is well-positioned for our next phase of growth, and we look forward to achieving our milestones for our pipeline and operations in the second half of 2019 and beyond. With that, I'll open the call for questions on our second-quarter financial results and commercial and corporate progress.

Operator?

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Martin Auster with Credit Suisse.

Unknown speaker

Hi, team. This is EK from Credit Suisse on for Marty. I just had a quick question in regards to the 32 new patient request. If you can elaborate a little bit on -- is that an aggregation since the commercialization of Azedra? Or is that within this past quarter? Additionally, would you be able to give any type of guidance in terms of the scheduling process for those 32 new patients, maybe opine on the gating steps to get a new schedule before the end of the year? That would be very helpful for us.

Mark Baker -- Chief Executive Officer

Thanks. Bryce, do you want to address question, or.

Bryce Tenbarge -- Senior Vice President, Commercial

Yes. Just to be clear, the 32 are cumulative since approval. And in terms of the status of those, right, they range from being scheduled for dosimetry all the way to still working through benefit verification with the centers and with payers. Also, we're in the process to -- of scheduling second doses for some of those patients as well.

As Mark said, those two therapeutic doses in the second quarter, we continue to schedule and dose patients. And the gating process is as we've always said, right? We identify the patients. We have to do the benefit verification, working closely with the centers throughout that process. Patient scheduling is very interesting. We've seen it range from advanced disease moving so rapidly that unfortunately patients don't make it to therapy to -- in other situations, patients fortunately being able to schedule the administration such that it fits comfortably into their lives.

So it's a wide range that can occur on an individual basis, but one of our focuses as a commercial team is to make sure centers can continue to move more rapidly through the identification, scheduling and administration process for each patient. And like I said, we work very closely with these centers to do that, helping them with their reimbursement questions, with the necessary process often of transporting these patients. We've got progress in place to do that. So we continue to make progress on that front.

Mark Baker -- Chief Executive Officer

So the 32 does not include patients that have already been treated. Once you're treated, you're no longer on treatment request.

Bryce Tenbarge -- Senior Vice President, Commercial

Right.

Mark Baker -- Chief Executive Officer

And in some cases, the patients didn't seem to be appropriate medically for the treatment. And so 32 doesn't include those patients.

Bryce Tenbarge -- Senior Vice President, Commercial

Right. If you're no longer under consideration, obviously, you're not in that list, right? Yes. Those are 32 active cases that we are working through the centers to move to treatment.

Unknown speaker

Thank you for that additional color.

Operator

Our next question comes from Chad Messer with Needham and Company.

Chad Messer -- Needham and Company -- Analyst

Great day. Good morning and thanks for taking my questions. A couple for me. First, starting with the NTAP payment.

Can you help me understand exactly what that means for you guys and for you getting paid for treatment? So that's a payment to the hospital, but does it necessarily have anything to do with what you guys are getting reimbursed? I'm actually kind of naive on this. If you could help me understand.

Bryce Tenbarge -- Senior Vice President, Commercial

Yes. No, Chad, and thanks for the question. It is the case that for all patients for Azedra who are treated inpatient, it's actually the hospital, right, that needs to seek out reimbursement and get paid. That's a separate process from the hospital paying Progenics.

Now, that said, we're very concerned obviously with that process because we want our customers to get quality reimbursement. You probably recall, because we have a fairly young patient population here with the average age of diagnosis being in the early 40s, the majority of patients are commercially insured. I'll get to in a moment how this impacts those patients. But primarily, this impacts the other portion of patients, not insignificant, 30%, 40%, that are covered through Medicare, right? Now I will say, when we talk to centers prior to, during, post launch, they necessarily view those two dichotomous patient populations as very different from a reimbursement standpoint.

Commercial payers have always said, and they are coming through, with quality reimbursement because of the high unmet need in the small patient population. The CMS reimbursement mechanism, which is driven by what we call the Medicare Severity Diagnosis Related Group, which is the MS-DRG, is a relatively small, fixed payment for the in-hospital administration of the products. Depending on which MS-DRG a hospital chooses, it ranges from anywhere from $5,000 to $20,000. So hospitals, being pragmatic, right, have to look at that and realize that for the average dose of Azedra costing around $150,000, there's a large gap, right, in their ability to get reimbursed for that.

So this announcement for those patients who are eligible for inpatient Medicare reimbursement is significant because it will cover 65% of the gap between the cost of Azedra and whichever MS-DRG the hospital applies. So we feel that -- again, it doesn't directly impact payment to Progenics, but the hospitals are going to be less reluctant to use this product in the Medicare population because the quality of their reimbursement just went up significantly. Mark?

Mark Baker -- Chief Executive Officer

So yes, we thought of this as a sort of 70-30 split between commercial and Medicare/Medicaid. So the significance of this news is that we now see a strong way for hospitals to get reimbursed on that 30%. And the 70%, as Bryce says, is something that has been looking good since the launch of the drug. And so for a center of excellence that wants to treat both commercial patients and Medicare patients, now there's been a substantial leg up.

It's not 100%, but it's 65% of the cost. And so we think that will have a very positive effect on Azedra use in those institutions.

Chad Messer -- Needham and Company -- Analyst

Right. That's very helpful. So what's good for your customers, the hospitals is good for you indirectly.

Mark Baker -- Chief Executive Officer

Yes, for sure.

Chad Messer -- Needham and Company -- Analyst

All right. Maybe moving on to the PSMA therapeutics. With Bayer finally going into the clinic trial, you now have two PSMA-targeted agents in development. Given your focus on PSMA AI, I imagine that's a good thing for you guys.

But can you just help us understand the difference between a thorium antibody and an iodine-labeled small molecule in terms of their properties and characteristics and how they may benefit patients differently?

Mark Baker -- Chief Executive Officer

Yes. So you've touched obviously on the two important characteristics of a radiopharmaceutical, which is what the targeting moiety is and what's the radioisotope. And so in prostate cancer, we've seen the use of small molecules and antibodies. My personal view is that when you're talking about imaging agents, antibodies don't make sense because of their uptake and clearance not really working in a diagnostic setting.

So we have focused our imaging agents on small molecules, as you know. But with a therapeutic, the use of an antibody does present some appealing benefits. And that is what Bayer is pursuing using our antibody in that collaboration, PSMA-targeting and thorium. Thorium is an alpha emitter; whereas with our 1095 drug, a small molecule, we're using iodine-131.

What's the difference in the isotope? Well, I think many have been intrigued by the alpha emitters because they offer a potential benefit in terms of the energy they bring to the killing of the tumor cells. And the primary concern there has been the side effect profile with alpha emitters, seeing some significant side effects, particularly around the salivary glands where there is some PSMA expression and the salivary gland function. So I think Bayer -- and we are making an intriguing bet there using antibodies as the targeting moiety and using the alpha emitters because the targeting moiety may help avoid these severe side effects and allow the alpha radiation to go right to the tumor. So that experiment is now being run.

They're in Phase 1, and we'll see if that strategic thinking pays off. With the small molecules, our drug, 1095, and then the drug now owned by Novartis, 617, where we're claiming ownership rights, are using small molecules. So I think the targeting moieties are very similar, but there are the differences between iodine and lutetium. For us, the advantages of iodine is it's very well known.

Its side effect profile, well known. It has good availability as an isotope. And so which isotope will prove best in the long run, lutetium or iodine, well, those experiments are being run right now. And I definitely think there's the potential to support in a commercial marketplace those two different isotopes.

That -- did I answer your question, Chad?

Chad Messer -- Needham and Company -- Analyst

Yes. No, I appreciate that. That was very helpful. Then I have maybe a quick one on the VA collaboration, sort of how that's working operationally.

Is this more of you're setting up your software with VA researchers? Obviously, they have, I imagine, a large number of prostate cancer patients. Or is this more VA clinical data is being looked at by Progenics scientists? Or is it kind of a collaboration of both? And what should we expect out of this collaboration in terms of benefit to Progenics?

Mark Baker -- Chief Executive Officer

Yes. Thanks for that question. And it's both. And from the VA perspective, this is bringing cutting-edge technology to the treatment of our veterans.

And in the VA system, prostate cancer, of course, is a cancer of major concern since that population is still overwhelmingly male. And so the West L.A. VA group has really been a leader there. And I also want to recognize the great role that the Prostate Cancer Foundation has played in building these relationships.

So goal #1 is how do we get cutting-edge care to our veterans? And this is a leading example of it. What's the benefit to Progenics? Well, first, that. That we're able to help these patients. And second, that we begin to generate very deep data.

And that's what our AI algorithms depend on, extensive deep data. If we were to follow patients in a clinical trial for the purposes of generating this kind of data, it would be very expensive and you would be looking at very significant CRO costs. But with the VA system, we're able to follow the men simply by looking at their healthcare records. And so it's a lower-cost way for us to generate really high-quality data that will train our algorithms over time.

So that aspect of it is the thing that we value most from a Progenics perspective. And our AI is moving ahead. A wonderful clip. As you heard earlier, we got 510(k) clearance very quickly from FDA on our cloud-based aBSI.

And this year, our AI is covering its costs. So our revenue from AI are covering the costs that we are spending on it. So -- and that's happened much more quickly. And I think that's the advantage, Chad, that we're out in front.

We're definitely ahead of anyone in prostate cancer in this type of work.

Chad Messer -- Needham and Company -- Analyst

And maybe one more quick one on AI, and that's your expanded relationship with FUJI. If I remember, it goes way back. We haven't heard very much news on that even though it's been going on for some time. But I have to take it that FUJI's pleased since they're stepping up with more money and more access to the expanded capabilities you have.

Can you just talk about what FUJI has been doing and what they hope to do and how they hope to benefit from this?

Mark Baker -- Chief Executive Officer

Yes. It's been a great relationship, going back, with them. They provide this software to doctors in Japan, and the doctors are using it in their everyday practice. So we see in Japan the adoption of artificial intelligence-based technologies.

And it's being used every day, something we don't see yet here in the U.S. So I think it's a great example of how to move forward. It's also showing ways in which we can monetize our work in AI. And of course, the Japanese market is quite unique, and so everything we learn in Japan won't translate into rest of the world. But in Japan, doctors are using the index products, sitting down with patients, showing them the reports that are coming from the BONENAVI software.

And so in Japan, a complete integration of artificial intelligence into the treatment of men with prostate cancer, and that provides us with a model as we'll roll it out here in the U.S. Whether our revenues will come from a pharmaceutical partner, such as FUJIFILM, in areas outside the United States or whether our revenues will come through selling more PyL and 1404, these business models, we'll be exploring, as you know, Chad. But great to see that continuing relationship with FUJIFILM, which has been going on since 2011.

Chad Messer -- Needham and Company -- Analyst

All right great.

Mark Baker -- Chief Executive Officer

Thanks, appreciate it. Appreciate all the insight. Thank you Chad.

Operator

Our next question comes from Biren Amin with Jefferies.

Biren Amin -- Jefferies -- Analyst

Yeah. Hi, guys, thanks for taking my questions. Mark, in the Q1, I think the company reported that you had 22 treatment requests. And it seems this quarter, of those, you fulfilled two of those.

I want to ask, of the remainder 20, how many are currently continued request? And how many have dropped off? I think you cited some of the reasons for dropping for advanced disease, but I'm just trying to, I guess, quantify that number. So I guess, how to think about the 32 requests that you have so far.

Mark Baker -- Chief Executive Officer

Yes. Thank you for that question, Biren. Treatment request, not a great metric. We've been providing the metric because we wanted to give insight to the launch early on.

But you get into some of this complicated accounting that you're just talking about, we're not including in that number patients that have already been treated, which include the patients treated in the second quarter, and now, patients being treated in the third quarter. We're not including in that the number of patients who may drop off the list because it's no longer appropriate for them to get the medication. So -- but you are seeing a good growth in the number of patients that are making treatment requests. So as we mentioned, our focus now is converting those patients to actually getting the dosed.

And the commercial team is quite focused on that, and Asha and her medical team, working with the KOLs and the patients, doctors in order to get that moving. The more traditional way to give you a view of our launch is, of course, sales. And we'll be, of course, reporting sales quarter by quarter. And we do expect by the end of the year that we'll begin to be able to make a sales forecast as we gain experience with how do these treatment requests turn into patients who are actually dosed, how long does it take for that to occur and then what's the interval between the first dose and the second dose. So we're learning a lot about that now and expect to be able to talk to the market about that by the time we get to the end of the year.

Biren Amin -- Jefferies -- Analyst

Well, let me ask the question a little bit different. So of the 22 treatment requests, if we just assume the two patients converted, that's a 9% conversion rate to treated patient. Do you think that's a fair predictor for the 32 treatment requests? Should I be applying that in Q3, that 9% conversion rate?

Mark Baker -- Chief Executive Officer

No. Because, I mean, these things take time, right? The treatment request comes through, and then a number of things have to be done. You have to verify the benefits. The hospital has to get ready.

You need scheduling. The patients have to schedule because they're going to have to go to the center, and they'll have to stay in the lighting room. So we are finding a lot of logistics that have to be taken into account. I think -- as I said, by the time we get to end of the year, we'll be able to give you a better view of how many of these treatment requests do we think turn into actual sales and how long does that take. But I would not use, yes, just that two number to make calculations because we definitely expect very significant amount of the treatment requests to turn into actual dosing.

Biren Amin -- Jefferies -- Analyst

Got it. And then on the basket study with Azedra that you're starting later this year, would this be registration-enabling, where it could lead a label expansion?

Mark Baker -- Chief Executive Officer

Yes. We think so. We don't have sign-off from FDA on that. But FDA, highly encouraging to us to move ahead.

So I think with good data, I fully -- yes, we have an excellent chance to get label expansion based on this one trial. And you see us taking that seriously, looking at a number of patients well over 100. We're projecting 150 patients. So we're making it a serious trial.

We have definite FDA buy-in as we'll be providing treatment to patients who are totally out of options, and that's highly motivating to the FDA. And as we speak to the KOLs, we see great interest in bringing Azedra into these populations. Asha, how would you describe the interest that you're seeing?

Asha Das -- Chief Medical Officer

I would echo your comments, Mark, that there is very high unmet need for these patients who have either few available therapies or exhausted those options.

Mark Baker -- Chief Executive Officer

So our strategy of developing radiopharmaceuticals that target biomarkers, basically. And here, we see the FDA moving to a regulatory strategy that reflects that very approach and the ability to define a cancer not by its tumor origin, so-called tissue-agnostic approach, but looking at the biomarker, here, the biomarker being the avidity for MIBG as determined by a scan. So we have now an FDA that has given us a regulatory path to -- so we can exploit the fullest potential of these agents in terms of the indication. And so our hope is, with the success in this trial, that we'll have a broad label for MIBG-avid patients. And if you talk to a patient with neuroendocrine tumors and you ask them, are they MIBG-avid? Are they somatostatin-positive? These are things that they know.

So we're seeing the potential that treatment in this space could be focused with Azedra and with Lutathera, which, as you know, is a somatostatin-targeted agent, and that patients might use both over the natural course of their disease.

Biren Amin -- Jefferies -- Analyst

And then a question on the NTAP. You mentioned that it came through last week and centers would receive a maximum of $98,500. And then, I guess, through the DRG, these centers can receive anywhere from $5,000 to $20,000. And -- so given the cost of Azedra's $150,000, how does the center make up the difference from NTAP and the DRG payment to the total cost of Azedra? Because I think on the -- because they would get anywhere, according to my calculation, anywhere from, I guess, $103,000 to $118,000.

So essentially, they would still be out-of-pocket for upwards of up to $48,000 to $47,000 per patient.

Mark Baker -- Chief Executive Officer

So these centers go through complex calculations, right? And they're not necessarily looking to make profits. But on the other hand, they have to bring their expenditures down. So in the past, they were looking at, well, $150,000 basically less what they could get from the DRG, which was a significant barrier to them treating a Medicare or Medicaid patient. Now it's come much closer.

As you point out, it doesn't cover the full amount, but they have other revenue sources related to that patient. Bryce, how are you seeing that?

Bryce Tenbarge -- Senior Vice President, Commercial

Yes. I mean, all that is true. But it is also true that there's another mechanism by which they can further reduce the gap, which is called an outlier payment, and they can apply for that. And the -- it's something we'll be working closely with centers to make sure we help them understand that situation and they help us understand their particulars because it is different by center.

But let me -- suffice to say that the, to your point, the gap that is left is actually above the threshold by which centers can apply for this further, what they call, outlier payment. So the mechanism they -- and all the mechanisms may never completely close the gap, but we feel that it can get even closer than what the NTAP would suggest. So -- and I do think there's a halo effect to all of this, right? One, as a manufacturer, we put in a lot of time and effort. We've utilized the input of KOLs, industry groups, our advocacy partners, to get this done.

Centers of excellence recognize that. And I think, again, we'll be working with them to -- so as you suggest, right, it's designed not to close the gap. But we can, I think, help them identify other avenues to further reduce it.

Mark Baker -- Chief Executive Officer

And there have been concerns about conventional MIBG, low-specific-activity MIBG, in whether it might be competitive with Azedra, which we really haven't seen but has been a legitimate concern. But now we have CMS saying, no, this new technology, Azedra, high-specific-activity MIBG, is worth it. And we'll pay, yes, up to $98,000 per dose so that Medicare and Medicaid patients will get it. So I think any concern that we would be seen conventional MIBG because Azedra is just too expensive for the hospitals, and I think that's falling away with this NTAP payment and with the payments that Bryce has just been describing.

Biren Amin -- Jefferies -- Analyst

Got it. And then maybe one last question on the pipeline. On 1095, you cite that you want to go on to pivotal trial next year based on discussions with FDA and also based on early data from the ongoing study. So can you just discuss what this early data and why it gives you confidence to move into a pivotal study next year?

Mark Baker -- Chief Executive Officer

Well, we'll have to see the data, certainly. As we look at PSMA-targeted therapeutics, we're seeing a growing body of data that indicates the strong efficacy for the PSMA-targeted agents. So I think as we make our decision next year, not only will we be looking at our data, but also the data generated from other small molecule PSMA-targeted therapeutics, such as 617. I, for one, am particularly going to be focused on the side effect profile of the drug as we see it being used.

Do we see significant advantages to the use of iodine as compared to lutetium or to alpha emitters, and thus, the drug seem well-tolerated? So far, it has. The side effect profile around the salivary grand has been that during treatment with 1095, there is xerostomia, dry mouth, but that reverses when treatment ends. Whereas, with some of the alpha emitters, there has been seen a real loss of salivary gland function. So we'll be looking closely both on the efficacy side, but also on the side effect side.

Operator

Our next question comes from Deepankar Roy with Brookline Capital.

Deepankar Roy -- Brookline Capital -- Analyst

Hi. Thank you. Thanks for taking my question. I was just wondering if you can provide some more details on what was done differently to this enrollment you completed so much ahead of schedule.

Mark Baker -- Chief Executive Officer

You're talking about the Condor trial with PyL?

Deepankar Roy -- Brookline Capital -- Analyst

That's right.

Mark Baker -- Chief Executive Officer

Yes. And there's a definitive registrational trial, which our team got completed in nine months. So I'm so pleased by that. Part of it is the work of the Progenics team, but part of it is, what we call, the power of PyL, that patients and doctors want to have that image.

And so we attribute a lot of the speed of enrollment to a very strong desire to get PyL images, and a lot of that being generated by the fact that as data around PyL is being presented, as you know, from prior quarters, we have academic institutions that are making PyL themselves, right? That's the power of PyL, that they make it themselves. And they're reporting just outstanding data about how that scan changes the course of treatment for the men. And so if you're a doctor, if you're patient and you're saying, well, if we get a PyL scan, your course of treatment is going to change. And the majority of the cases -- and some -- in that one recent study, 89% of the time, there's a change, then you're going to want that picture.So I think it's the two elements: great effort by the team here and very strong desire by patients and doctors to get PSMA images.

Deepankar Roy -- Brookline Capital -- Analyst

Yes. Great. Great. So I was wondering, is there is similarities in patients between the Condor and others that can be leveraged for enrollment? So in other words, from the secondary endpoint analysis in Condor, these patients into Arrow.

And if that expedites the Arrow timelines or the planned Phase 3 trial?

Mark Baker -- Chief Executive Officer

I'm not sure I'm understanding your question.

Deepankar Roy -- Brookline Capital -- Analyst

So I was just wondering if the secondary endpoint analysis in Condor might be useful in getting more patients into the other trials?

Mark Baker -- Chief Executive Officer

Yes. No. I think that the Condor trial will be sufficient, assuming we meet the endpoint for submission. So I think the Condor will stand on its own.

The endpoints in the two trial and the patients populations that we're studying is slightly different.

Deepankar Roy -- Brookline Capital -- Analyst

Thank you.

Operator

I'm not showing any further question at this time. I'd like to turn the call back over to Mr. Baker.

Mark Baker -- Chief Executive Officer

Thank you all again for joining us this morning to review our continued progress, financial results and upcoming milestones. We look forward to speaking to you again soon. Thank you.

Operator

[Operator signoff]

Duration: 51 minutes

Call participants:

Melissa Downs -- Head of Investor Relations

Mark Baker -- Chief Executive Officer

Bryce Tenbarge -- Senior Vice President, Commercial

Asha Das -- Chief Medical Officer

Pat Fabbio -- Executive Vice President and Chief Financial Officer

Unknown speaker

Chad Messer -- Needham and Company -- Analyst

Biren Amin -- Jefferies -- Analyst

Deepankar Roy -- Brookline Capital -- Analyst


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